By Rodney Van Dooren
Capital expenditure by the Government on infrastructure development, real estate, enhanced interconnectivity and other strategic initiatives play a critical role in spurring the economy. Investment across such key pillars stimulate economic growth, create jobs and attract investment. A critical enabler for this undertaking by the government is tax collection, which empowers the exchequer to fund these projects. However, the shadow economy run through illicit trade deprives the citizens of facilities, compromises health and productivity and stalls the nation’s progress.
So why is the crime in tobacco products or cigarettes so lucrative? Generally, one container of illicit cigarettes has an estimated street value of $2.3 Mio. A packet of illicit cigarettes is produced for an estimated $0.20 and can be sold in India at about $5 dollars, and the trading in illicit cigarettes is low risk, high reward; and viewed as a petty crime. Approximately 12% of the global cigarettes consumed are illicit which impacts Governments across the globe to the tune of $40.5 billion in tax losses – In India, estimates from Euromonitor indicate tax losses at close to $2 billion. To a lesser extent, the issue in India is of a domestic nature, through local illicit manufacturing; but of greater significance is the transnational supply chain – and so a domestic and transnational solution is necessary, where preventative action from countries of origin and transshipment are essential.
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There are various smuggling routes around the world. With India in focus, here’s an example from closer home – Cambodia is the origin of counterfeit cigarette products, which are generally smuggled or transited in seaports through Thailand before reaching India. There are also examples of direct flights from Cambodia to India where counterfeit cigarettes were seized upon arrival. Second to that you have products that are called illicit whites (cigarette products with no legal domestic market), which in the case of India are cigarettes produced or transhipped in the UAE and smuggled into India. Then there are contraband products coming from Indonesia, typically transhipping in Singapore and eventually smuggled into India.
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